Payout of prizes
Winnings (in USA) not necessarily paid in a lump sum , contrary to the expectations of many lottery participants. In some countries, mainly in the USA, the winner can choose between an annuity payment and a one-time payment. One-time payment ( cash or lump sum payment ) represents the "smaller" amount, than announced (annuity) jackpot, even before applying any deductions, to which the prize is subject. While withholdings vary by jurisdiction and how winnings are invested, supposed, what's the winner, chooses a lump sum, expects to get 13 of the advertised jackpot at the end of the tax year. In this way, jackpot winner 100000000 US dollars, who will pick cash, can count on a net amount of 33 333 333,33 USD after filing tax documents for the year, in which the jackpot was won.
Lottery annuities often range from 20 to 30 years. Some lotteries in the USA, especially those, which offer a "lifetime" prize, don't offer a lump sum option. According to some experts, it is better to choose an annuity, than a lump sum, especially those, who have no investment experience.
In some online lotteries, the annual payout is only 25000 dollars, and in the last year, a one-time payment is paid . This type of installment payment is often done by investing in securities, provided by the state. Online lotteries pay winners through their insurance . However, many winners choose the lump sum, as they think, that they can get a higher rate of return on their investment elsewhere.
In some countries, lottery winnings are not subject to personal income tax , therefore, tax implications should not be considered when choosing a payment method. In France, Canada, Australia, Germany, Ireland, Italy, New Zealand, Finland and the UK all prizes are immediately paid in a lump sum and are tax-free to the winner. In Liechtenstein, all winnings are tax-free, and the winner can choose to receive a lump sum or annuity in relation to the jackpot prizes.
In the United States, federal courts have consistently asserted, that the lump sum, received from third parties in exchange for rights to lottery annuities, are not capital assets for tax purposes. Rather, the lump sum is subject to normal income tax deductible.
Some people hire a third party, to cash out a lottery ticket. This can be done for, to avoid paying income tax, to hide the gain from alimony or money laundering, obtained from illegal activities; some jurisdictions are investigating too frequent "winnings" and may freeze payments, to prevent these abuses.
In jurisdictions, where public disclosure is required for winners, to claim your prizes, some winners may hire an attorney, to create a blind trust for them, so they can claim their prize and remain anonymous. This is for, so that winners can avoid being scammed, jealousy and other flaws, that can occur when winning a lottery jackpot.